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The Zacks Analyst Blog Highlights: Arch Coal, KEMET, Materion, Methanex and RH

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For Immediate Release

Chicago, IL – November 9, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Arch Coal, Inc. (ARCH - Free Report) , KEMET Corp. (KEM - Free Report) , Materion Corp. (MTRN - Free Report) , Methanex Corp. (MEOH - Free Report) and RH (RH - Free Report) .

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Here are highlights from Thursday’s Analyst Blog:

5 Winners for the Best Midterm Rally in 36 Years

Wall Street sees best rally after midterm election in over three decades, as a congressional power divide eased fears about abrupt changes in policies that could easily hurt corporates. And with the United States economy on track for a mind-blowing year that could come seriously close to a 13-year milestone, the stock market seems to be in good shape. Thus, investing in solid stocks that can make the most of the current positives seems judicious.

Best Post-Midterm Rally Since 1982

As widely expected, the Democrats gained control over the House of Representatives, while Republicans retained control of the Senate. The results, thus, delivered a split Congress and a legislative gridlock for the remaining two years of President Trump’s tenure.

Stock market bulls cheered the outcome. After all, things aren’t that bad in case of a divided Congress. Although the markets did get a nice pop in anticipation of tax reforms, the recent trade-related issues have been a dampener. Consequently, Democrats controlling the House of Representatives will no doubt compel Trump to tone down his hawkish trade policy stance.

The Dow Jones finished nearly 550 points higher, or 2.13% on Nov 7 and registered its best one-day climb since Oct 16. The broader S&P 500 climbed 58.43 points or 2.1%, its third best day of 2018. Goldman Sachs further noted that Wednesday marked the biggest post-midterm gain for both the Dow and the S&P 500 since the day after the 1982 contest, when both the bourses rose 4.3% and 3.9%, respectively.

There are, in fact, a lot of similarities between the 1982 midterm election and this year. Needless to say, 36 years back, Republican president Ronald Reagan had majority in the Senate, while Democrats controlled the House.

Stalemate in Washington: Good for Stocks

Since 1928, stocks have always generated an annual average return of 12% in years when a Republican president held office, while Congress was split between the red wave and the blue wave, per Bank of America Merrill Lynch. And in the year after the midterm election, returns on average have surged more than 20%.

Goldman further added that where Democrats control the House and Republicans’ the Senate, the S&P 500 is widely expected to gain 20% on average in the following one-year period. Meanwhile, if Republicans had won the House and Democrats the Senate, the S&P 500 was anticipated to gain a meager 3%.

But no matter what the outcome is, the stock market is expected to gain traction post-midterm. The S&P 500 has increased on average 15.3% in the six months following midterm election in the third year of a given presidency, which is incidentally this year. Research also showed that the frequency of advance (FoA) for this occurrence was 94% of the overall time period of Oct 31, 1944-Sep 29, 2014, per S&P Capital IQ.

And how can we forget that the stock market, historically, gains in the November-through-May period or the so-called “winter” months, while markets have been more or less flat during the “summer” months (May-October).

U.S. Economy in the Pink

But, why just rely on historic patterns? The U.S. economy is doing well and that should eventually help the stock market maintain momentum. In the last two quarters, the U.S. economy recorded the fastest six-month growth in four years and is on track to hit the Trump administration’s annual growth target of 3%. If that happens, it would be the best yearly performance since 2005, two years before the Great Recession.

The U.S. economy got a boost in the third quarter, with GDP increasing at an annualized pace of 3.5%, per the U.S. Commerce Department. In fact, the country’s total output of goods and services followed an even stronger 4.2% growth in the second quarter.

At the same time, consumers in America are currently most confident in almost two decades, courtesy of a healthy labor market. Their assessment of present-day conditions is positive, making them confident of continued economic expansion, at least in the near term (read more: Consumer Confidence Leaps to 18-Year High: 5 Big Gainers).

5 Top Picks

With the stock market gaining strength typically after the midterm election and a late-year spurt may as well be on the cards banking on solid economic growth, investing in fundamentally sound stocks seems prudent at the moment.

Such stocks are none other than those that flaunt a Zacks Rank #1 (Strong Buy) as well as a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

Arch Coal, Inc. produces and sells thermal and metallurgical coal from surface and underground mines. The Zacks Consensus Estimate for the company’s earnings rose 39.4% in the last 60 days.  The company’s expected earnings growth rate for the current year is 32.5% compared with the Mining - Miscellaneous industry’s projected rise of 4.3%. The stock had gained 1.5% on Nov 7.

KEMET Corp. manufactures and sells passive electronic components. The Zacks Consensus Estimate for the company’s earnings rose 34.1% in the last 60 days.  The company’s expected earnings growth rate for the current year is 90.9% compared with the Electronics - Miscellaneous Components industry’s expected rise of 15%. The company saw its shares jump 4.8% yesterday.

Materion Corp. manufactures and sells advanced engineered materials. The Zacks Consensus Estimate for the company’s earnings rose 6.5% in the last 60 days.  The company’s expected earnings growth rate for the current year is 32.6% compared with the Mining - Miscellaneous industry’s projected rise of 4.3%. The stock went up 2.3% on Nov 7.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex Corp. produces and sells methanol. The Zacks Consensus Estimate for the company’s earnings rose 5.6% in the last 60 days.  The company’s expected earnings growth rate for the current year is 63.7% compared with the  Chemical - Diversified  industry’s estimated rise of 11.4%. The company saw its shares climb 5% yesterday.

RH operates as a retailer in the home furnishings. The Zacks Consensus Estimate for the company’s earnings rose 0.1% in the last 60 days.  The company’s expected earnings growth rate for the current year is 150.2% compared with the Electronics - Miscellaneous Components industry’s projected rise of 12.1%. The stock soared 4% on Nov 7.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.



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